CUNA files comments on proposal to simplify share insurance coverage rules

CUNA submitted comments to NCUA supporting regarding the Simplification of Share Insurance Rules proposed rulemaking. The proposal is intended to simplify the share insurance regulations by establishing a “trust accounts” category that would provide for coverage of funds of both revocable trusts and irrevocable trusts.

The proposed rule would provide consistent share insurance treatment for all mortgage servicing account balances held to satisfy principal and interest payments to lenders. It would also provide flexibility for the NCUA to consider various records maintained by third parties on behalf of the members of a federally insured credit union (“FICU”) in determining share insurance coverage in liquidations. 

“[W]e appreciate the NCUA pursuing changes to these rules, as they have been a source of member confusion for years. The proposed amendments should achieve their intended purposes of: (1) providing FICUs, FICU employees, and those with member accounts at FICUs, with a rule that is easier to understand; (2) providing parity with changes adopted by the FDIC in January 2022; and (3) facilitating the prompt payment of share insurance in accordance with the FCU Act,” the letter reads.

To help clarify insurance limits, the proposed amendments would harmonize insurance coverage of revocable and irrevocable trust accounts and adopt a single formula for calculating coverage for these funds.

While CUNA supports merger of revocable and irrevocable trusts accounts into a single “trust accounts” category, it urges the NCUA to track instances in liquidations where this and other proposed changes result in reduced insurance coverage, and to revisit the amendments if necessary.

Other proposed changes, such as those regarding the coverage of mortgage servicing accounts and recordkeeping requirements would generally be positive, according to CUNA.